Homes jumped 10-15% in price in 2 mo in my area & there is no inventory.Would it be smart to buy now

I rented out my more expensive home a couple of years back and now I am looking to buy a less expensive home closer to my work with my girlfriend. We started looking in November when there was still some inventory but wanted to feel out the market before making a serious bid. But that looks like it may have been a mistake as inventory has shrunken in the last month, and the houses that fit our criteria have gone from.asking prices of 150-180k in November to 175-200k in only 2 months and they are all getting multiple bids on the first day.

Prices are rapidly approaching a payment that is very close to what it'd be to rent. We qualify together for a 350k preapproval from our bank so we can afford the higher prices right now, but we are very hesitant to jump on anything and pay a high price for a home, but more importantly settle for a lesser home, and perhaps watch nicer homes become available in the near future. When we first started looking in November there was 6 houses in our area that fit our criteria, now there is only one that's not pending. Also, unemployment around here is around 13% so I am confused about so few homes being brought to the MLS.

Does anyone think there will be more inventory available in the spring and what is your opinion of how quickly prices will inflate or stabilize?

Re: Homes jumped 10-15% in price in 2 mo in my area & there is no inventory.Would it be smart to

There is no doubt that low inventory is driving up prices however someone is buying at those prices too... the question is, why?

It's already been 6 years since home prices went off the cliff. Is that long enough for America to forget? I'd love to see some academic research on how long America can remember major events. I was hoping for at least 10 years. If it's really 6, never mind home prices, I'd be more worried about the next war we get into.

Re: Homes jumped 10-15% in price in 2 mo in my area & there is no inventory.Would it be smart to

GreenHead wrote: we are very hesitant to jump on anything and pay a high price for a home, but more importantly settle for a lesser home, and perhaps watch nicer homes become available in the near future.

Your hesitance is prudent. Apparently, inventory shortages are a symptom of a bottoming market, but I don't know how this market compares with previous property cycles in that respect, and frankly I'm not clear how relevant it would be any way, since this time is different. Probably what's as important is the effect of low inventory coupled with historically low rates, the latter creating the demand. If you are going to make a comparison, the FTB's buyer tax credit (2009-10) would be more useful, which we know spurred sales and lifted prices. It also brought forward buyers, who may not otherwise have bought, creating a vacuum down the line, causing prices to fall again. The other components at play are a weak economy, tighter lending standards and unemployment. The economy may eventually improve, but there are questions about how much unemployment is structural, and regulation on lending is probably here to stay. So when rates go up (post 2014), and inventory levels return to normal, the economy is going to have to be strong to support a housing recovery. It may happen, barring any untoward catastrophic events, but it's hard to say. I think many will need to adjust to a different kind of housing market over the next decade, but that shouldn't mean blind acceptance. There's more to life than bricks and mortar. There'll always be those who will pay anything for nothing, but there's not rule that should include all of us.